Succession will continue to be on the minds of a lot of businesses owners in 2022 and is presenting companies like Central McGowan with growth opportunities. After three acquisitions in 2021, Central McGowan President/CEO Joe Francis is not ruling out more this year.

Source: Central McGowan

Cobot welding package

“We’re growth minded and opportunistic, and I believe there will be more acquisitions down the road, it’s just a matter of when and what market, what type of business,” Francis told gasworld.

“While we don’t set particular metrics or have a specific acquisition strategy, we continually seek out opportunities as it’s certainly in our DNA. We have a comprehensive process for vetting them out.

“The market around us is fairly stable. There are not a lot of small independents left from a welding supply standpoint, but you never know if you continue to expand geographically what might be out there. And we have three business units: distribution, automation and CO2 solution, so the net we cast is pretty broad. We are looking at investing back into the business with physical assets and people.”

The Minnesota-based distributor completed its third acquisition of 2021 in November with Preferred Welder Sales in Mankato, Minnesota, following deals for Metro Welding Supply in Minneapolis, Minnesota, in April and Fessler Carbonic Gas in Des Moines, Iowa, in March.

Central McGowan also expanded its carbon dioxide (CO2) business with the acquisition of St. Paul, Minnesota-based Jasons Beverage Carbonation Company in 2019. It now has seven locations, spread across Minnesota and areas of North Dakota, South Dakota, Iowa and Wisconsin. ColdZERO™ — Central McGowan’s own brand of dry ice – is manufactured fresh daily at its St. Cloud and St. Paul locations.

“Preferred Welder Sales provided access to a new customer base for us and allowed us to expand into southern Minnesota,” Francis said.

“It jump starts our potential in southern Minnesota. Metro was also a new customer base and both fit us well culturally. We were able to expand our Twin Cities market and it expanded our capability to include welding and automation after the Jasons acquisition for the CO2 market in 2019. Fessler Carbonic is different than the other two – their whole business revolves around beverage carbonation and supporting customers needing CO2.  

“We’ve gotten pretty good at operating a beverage carbonation business. We have a pretty good recipe in making those type of businesses a success.”    

With headquarters in St. Cloud, Minnesota, Central McGowan is a diversified independent distributor of industrial, medical and food and beverage gases; welding equipment/technology and supplies; and dry ice. This year, Central McGowan celebrates 75 years in business and Francis is the third generation from his family to lead the company which has been expanding.

And these are exciting times for the company with the acquisitions.

Preferred Welder Sales has served the Mankato area and southern Minnesota since 1987, specializing in the farm and auto industries as well as servicing and repairing most brands of welding and cutting equipment. Fessler Carbonic Gas - founded in 1940 - is a beverage carbonation business with customers all over Iowa.

Fessler delivers high-pressure cylinders of carbonic and nitrogen gases and beverage gas equipment; does on-site refills of CO2 via bulk tankers; and installs and maintains beverage equipment for restaurants, bars, convenience stores, stadiums, microbreweries and more. The acquisition more than doubled Central McGowan’s beverage carbonation business, and built upon the 2019 acquisition of St. Paul, Minnesota-based Jasons Beverage Carbonation Company which has been rebranded as Central McGowan CO2 Solutions.

Metro Welding Supply is a bustling welding distribution store that has served the Minneapolis area since 1985.

Francis says all three acquisitions became available due to succession.

“All three of the acquisitions in 2021 related to succession planning. Each of the owners had no internal successor and were looking at retirement,” Francis said.

Succession is relevant to a lot of independent distributors this year and Meritus Gas Partnerships – established a little over a year ago – has signed up five distributors to its platform with the aim being to establish a national federation of independent distributors of industrial, medical and specialty gases and associated welding and safety supplies.

Source: Central McGowan

Joe Francis

Francis believes there will be more acquisitions related to succession this year across the industry.

“I do think there will be more acquisitions in the industry this year,” Francis said.

“I think Meritus has a unique strategy, I know the folks there, and I wish them success. Succession challenges are certainly out there, I don’t know whether I would call it one of the biggest issues for distributors right now. However, the pandemic coupled with the unknowns of what’s coming from a tax implication standpoint, have people more actively looking at what their options are. If they don’t have an internal successor, it’s likely that they are looking at being able to be acquired by somebody.

“We [Central McGowan] got lucky, we went through a succession planning process, ownership and management, ten years ago. I’m third generation, and what I learned is that the commitment and support of the second generation is vital  to ensure the transition to third generation is successful. There’s no way we could have done what we did without that support. People are starting to realize that succession is a big challenge and trying to figure out their plans.

Francis says  another big challenge the industry will face in 2022 is the labor market, including recruitment, retention and training.

“While the lack of drivers often gets  the spotlight, the tight job market is much broader than that,” Francis said.

“You also have supply chain disruption. We try to buy a lot of our products locally but we are not immune to supply chain issues.”

Source: Central McGowan

Bulk truck

CO2 availability caused problems for some in certain regions over the summer months especially last year. Central McGowan expanded its Fargo, North Dakota CO2 distribution hub to be a fully-stocked retail store and distribution site in October 2020 and has managed to keep its customers stocked with CO2 despite tightening in supplies.

“In the Midwest we have a big supply of CO2 with the ethanol plants so we are a little bit safer from a total supply point but it does ebb and flow and it has fluctuated in the past,” Francis said.

“But it has been challenging. What we have managed to do is invest heavily in our bulk fleet, so we pick up CO2 ourselves. We’ve balanced out where we pick up product and invested in increasing our storage capacity across a few different locations.

“When things got tight over the summer, that’s when we got an influx of spot buying calls which we turned away. We need to make sure our current customers don’t run out, so we haven’t taken on some of that new business. We are still growing our customer base, but we are adding customers with a plan, with a contract, to make sure we have a commitment from them so we can make a commitment with the suppliers.”

The recent acquisitions have grown Central McGowan’s footprint and customer base, and expanded its employee roster to over 130.

“It’s our people who have been the backbone of success,” Francis said.